United States

Reminder of revocation or denial of passports for delinquent taxpayers

TAX ALERT  | 

The IRS recently issued an information release to remind taxpayers that they may not be able to renew a current passport, or obtain a new passport, if they are delinquent in paying federal taxes.

The Fixing America’s Surface Transportation (FAST) Act added section 7345 to the Internal Revenue Code. The section provides that having a, “seriously delinquent tax debt,” is a ground for, “denial, revocation, or limitation of a passport.” A seriously delinquent tax debt is generally an assessed tax debt that exceeds $50,000 (adjusted for inflation after 2016, and currently $52,000) for which a notice of lien has been filed. The tax debt includes penalties and interest.

There are exceptions to passport revocation/denial, including: an agreement for debt repayment, innocent spouse relief, suspension of collection because of a collection due process hearing, and, certification of a seriously delinquent tax debt will be postponed while an individual is serving in a designated combat zone.

The IRS previously issued Notice 2018-1 to provide guidance on the implementation of section 7345. With this new information release, the IRS provided further procedural clarification on the passport revocation process.

First, the IRS certifies to the State Department that a taxpayer owes a seriously delinquent tax debt. After certification, the IRS sends the taxpayer Notice CP508C. The notice explains the steps a taxpayer must take to resolve the debt. The IRS will not send copies of Notice CP508C to representatives with a power of attorney on file. Taxpayers who receive this notice have the option of setting up a payment plan over the phone.

After a taxpayer pays his or her delinquent debt, or makes an alternative payment arrangement, IRS will reverse the taxpayer’s certification within thirty days. The State Department will then remove the certification from the taxpayer’s record. The IRS can expedite the reversal for a taxpayer who resolves his or her debt, has a pending passport application, and has imminent travel plans or lives abroad with an urgent need for a passport.

Before denying a passport renewal or new passport application, the State Department will hold the taxpayer’s application for 90 days. This 90-day hold is to allow the taxpayer time to resolve any erroneous certification issues, pay the tax debt, or enter into a satisfactory payment arrangement with the IRS. Under section 7345, the IRS will not certify a taxpayer as owing a seriously delinquent tax debt if the taxpayer pays the debt in full, pays the debt timely under an installment agreement, pays the debt under an accepted offer in compromise, pays the debt under the terms of a settlement agreement with the Department of Justice, requests or has a pending collection due process appeal, or has collection suspended by making an innocent spouse election or by requesting innocent spouse relief.

In addition to the scenarios above, the IRS, currently, will not certify a taxpayer as owing a seriously delinquent tax debt, or will reverse the certification, if the taxpayer is in bankruptcy, is deceased, is identified as a victim of tax-related identity theft, is located in a federally declared disaster area, has a request pending with the IRS for an installment agreement, has a pending offer in compromise, if the IRS has accepted an adjustment that satisfies the debt in full, or if the IRS has determined that it currently cannot collect from taxpayer due to hardship.

If you have received a notice of tax deficiency, be aware that the IRS may, eventually, contact the State Department to certify that you are seriously delinquent. Contact your tax advisor to discuss your options for paying tax due to prevent the revocation of your passport or denial of an application for a passport.

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